Depreciation Types

Depreciation Types

Use

You specify the depreciation types and valuation types allowed for each depreciation area in FI-AA Customizing (Depreciation). The system then issues an error message and rejects posting when you try to use a type of depreciation that is not explicitly allowed.

The following direct depreciation or valuation types are supported:

Features

Ordinary Depreciation

Ordinary depreciation is the planned deduction for wear and tear during normal use of an asset.

Special Depreciation

Special depreciation represents deduction for wear and tear on an asset from a purely tax-based point of view. This form of depreciation allows a percentage depreciation, possibly staggered, within a period allowed by the tax authority, without taking into account the actual asset depreciation.

Unplanned Depreciation

Ordinary depreciation reflects the deduction for wear and tear during the normal use of the asset. Unusual influences, such as damage which leads to a permanent decrease in the value of the asset, are covered by unplanned depreciation.

Reduction of APC

Reduction of APC allows you to reduce the depreciation base of an asset by a given amount. This type of depreciation has to be posted manually. It cannot be posted automatically using calculation keys like the other depreciation types.

It is possible to illustrate this type of depreciation using income tax law in certain countries. According to such laws, you are allowed to transfer the gain from the sale of an asset to a replacement acquisition. As a result you can distribute the taxation of the gain over the expected useful life of the replacement acquisition (see Transferred Reserves).

Special system functions support the creation and writing-off of these special reserves. For more information, see Derived Depreciation Areas.

Interest

For internal accounting purposes, it is also relevant to evaluate the fixed capital tied up in an asset in addition to the depreciation. You can account for the tied up capital by calculating imputed interest (see Calculation of Interest).